UPDATE: Chinalco In Talks With Rio On Board Seat, Possible Deal
February 10 2009 - 1:14AM
Dow Jones News
Aluminum Corp. of China Deputy General Manager Lu Youqing said
Tuesday the company is in "intense" talks with Rio Tinto PLC (RTP)
about a potential deal and a seat on Rio's board, signaling the
Chinese mining giant wants a bigger presence in the
Anglo-Australian firm.
Lu said both sides are discussing the size of the deal and the
financing involved, but declined to disclose details, or confirm
whether Aluminum Corp., known as Chinalco, is seeking a 15%-20%
stake in Rio Tinto.
Another Chinalco official, who spoke on condition of anonymity,
said earlier Tuesday Chinalco is in talks with Rio Tinto on a
possible asset purchase. The official told Dow Jones Newswires
"money shouldn't be a problem" for Chinalco in closing the
deal.
Rio Tinto, which is looking for help to pay down some of its
US$38.9 billion debt, said earlier this month it is talking with
the Chinese firm on a possible sale of minority stakes in some of
its mining operations and an investment in convertible
instruments.
Chinalco, China's biggest aluminum producer by output, became
Rio Tinto's biggest shareholder last year after it teamed up with
Alcoa Inc. (AA) to pay US$14.1 billion for a 9% stake in the Rio
Tinto group, which translates into a 12% stake in the listed
company.
Chinalco's investment represented the biggest overseas
investment by a Chinese firm on record. The Australian newspaper
reported last week that the deal under discussion could be worth an
estimated US$20 billion.
Chinalco has said it wouldn't seek to appoint a director to Rio
Tinto PLC if it holds less than 15% of the company.
"The 12% (of Rio Tinto PLC) that Chinalco currently owns has no
voting right (on the board)," said Wang Lixin, of Beijing metals
consultancy Umetal.
"A deal could give Chinalco those voting rights. This is very
important to Chinalco," she said.
State-controlled China Development Bank helped Chinalco on its
first Rio Tinto investment last year. However, analysts are
concerned that banks would be unwilling to lend funds for
acquisition deals due to the financial crisis.
The Chinalco official who declined to be named also said
Chinalco will appoint Xiong Weiping as chairman to replace Xiao
Yaqing.
Xiao, who joined Chinalco in March 2002, will be promoted to a
"more senior position" outside the company, the official said,
which means Xiao would also leave his post as president of
Chinalco's listed unit, Aluminum Corp. of China Ltd. (ACH), or
Chalco.
Xiong, 52 years old, was a vice president of Chinalco from 2000
and left to join China Travel International Investment Hong Kong
Ltd. in 2006, where he is now a vice chairman and general
manager.
An official from the general manager's office of China Travel
International said the company hasn't received any notice about
Xiong leaving.
"Xiong is still working here now," said the official, who
declined to be named. She didn't elaborate.
Chalco's shares were suspended from trading in Hong Kong and
Shanghai Tuesday.
In a statement to the Hong Kong stock exchange, Chalco said its
H shares were suspended pending the release of a company
clarification on media reports about management changes.
-By Chuin-Wei Yap and Juan Chen; Dow Jones Newswires; 8610 6588
5848; juan.chen@dowjones.com
(Kersten Zhang of The Wall Street Journal contributed to this
story.)